Aviva Plc · LSE:AV.
Aviva — H1 2006 Earnings Presentation
40 slides from Aviva's earnings presentation, Aug 9, 2006
Slide 1: 2006 Interim Results
2006 Interim Results 9 August 2006
Slide 2: Agenda
Agenda • Introduction Richard Harvey Group Chief Executive • Financial review Andrew Moss Group Finance Director • Review of the business Richard Harvey • Review of AmerUs Tom Godlasky CEO, AmerUs Group • Questions & Answers 2 © Aviva plc
Slide 3: Disclaimer
Disclaimer This presentation may contain “forward-looking statements” with respect to certain of Aviva’s plans and its current goals and expectations relating to its future financial condition, performance and results. By their nature, all forward-looking statements involve risk and uncertainty beca
Slide 4: Profitable growth across the portfolio
Profitable growth across the portfolio Operating profit (EEV basis) £1,699m +27% Operating profit (IFRS) £1,376m +45% Long term savings sales (PVNBP) £15,631m +25% New business contribution £459m +17% General insurance COR 92% (2005: 95%) Interim dividend per share 10.82p +10% Return on equity share
Slide 5: Financial review
Andrew Moss Group Finance Director Financial review Interim 2006 Operational performance
Slide 6: Strong performance across all businesses
Strong performance across all businesses H1 2006 H1 2005 Growth † £m £m % Life EEV operating return 1,021 857 19% Fund management 33 26 18% General insurance and health 866 694 23% Non-insurance operations 29 37 Corporate costs (73) (83) Unallocated interest (177) (213) Operating profit: EEV basis (
Slide 7: Long-term savings: strong growth across our businesses
Long-term savings: strong growth across our businesses H1 2006 Sales (1) Growth (2) Aviva International £m % International: Life and pensions 7,331 10% • 56% of total Group sales Investments 1,401 42% 8,732 14% • Bancassurance channel sales up 17% Aviva UK • France up 10% Life and pensions 5,816 35%
Slide 8: Long-term savings: excellent growth in the UK
Long-term savings: excellent growth in the UK H1 2006 Sales (1) Growth (2) • Growth ahead of the £m % market Individual pensions 2,188 86 • 43% growth v HY05 Group pensions 569 19 Annuities 748 (5) • Individual pension sales up 86% Bonds 1,626 33 • Bond sales up 33% Protection 520 11 reflecting impr
Slide 9: Life: new business contribution up 24%
Life: new business contribution up 24% Contribution (1) Margin (1) H1 2006 H1 2005 H1 2006 H1 2005 £m £m % % France 64 48 3.2 2.6 Ireland 8 8 1.4 2.3 Italy 26 20 1.6 1.5 Netherlands 17 18 1.5 1.3 Spain 80 70 8.7 7.3 Other countries 22 16 2.0 2.0 Aviva International 217 180 3.0 2.7 Aviva UK 135 106 2
Slide 10: Life: continued strong contribution at a net level
Life: continued strong contribution at a net level New business contribution Margin H1 2006 H1 2005 H1 2006 H1 2005 £m £m % % Net to shareholders (1) 194 158 1.7 1.7 Analysed as Aviva International 99 83 1.9 1.7 Aviva UK 95 75 1.6 1.7 Bancassurance 59 42 2.7 2.5 Non bancassurance 135 116 1.5 1.5 10
Slide 11: Life EEV operating return up 19%
Life EEV operating return up 19% H1 2006 H1 2005 • France – new business growth and £m £m benefit of favourable experience Aviva International • Ireland – Ark life offset by adverse France 196 158 expenses and lapses Ireland 8 22 • Italy/Poland – new business growth Italy 53 47 Netherlands 185 125 •
Slide 12: Life: higher new business and existing business profits
Life: higher new business and existing business profits H1 2006 H1 2005 £m £m Total Total New business contribution post cost of capital 352 286 Expected returns 675 595 Experience variances (9) (31) Operating assumption changes 3 7 TOTAL 1,021 857 UK International Experience variances (67) 58 Opera
Slide 13: Life IFRS profits up 39%
Life IFRS profits up 39% • France: H1 2006 H1 2005 • Lower realised gains £m £m (exceptional year in 2005) Aviva International • Netherlands: France 116 131 • Benefit of higher interest rates (release of 2005 guarantee Ireland 31 14 provision) Italy 28 24 • Ireland: Netherlands 225 62 • Inclusion of
Slide 14: General insurance and health profits continue to grow
General insurance and health profits continue to grow H1 2006 H1 2005 • International: £m £m • Operating profits up 14% to £311m Underwriting result 346 182 • Reduced GI motor and property LTIR 520 512 claims and proposed healthcare merger in the Netherlands Operating profit 866 694 • Favourable wea
Slide 15: General insurance: completion of RAC integration
General insurance: completion of RAC integration • Integration complete • Non-core businesses sold • 2006: proceeds £354m, profit on disposal £66m • 2005: proceeds £139m, profit on disposal £5m • RAC has contributed £86m to UK GI and non-insurance profit including £43m cost savings • On track to del
Slide 16: Fund management boosted by increased sales
Fund management boosted by increased sales H1 2006 H1 2005 • Morley: Positive market £m £m movements, new business mandates and Morley (UK and international) 31 18 performance fees Other UK (5) - • France: Higher funds France 16 10 under management Netherlands 13 8 • Netherlands: Separate FM Other c
Slide 17: Capital strength
Capital strength • IGD solvency up £0.6bn to £4.2bn, cover of 1.9 times • NAV per share 643p (31 Dec 2005: 622p) • Interim dividend growth 10% to 10.82p per share • £560m of capital generated post dividend in H106 17 © Aviva plc
Slide 18: Summary
Summary • Long term savings new business sales up 25% • EEV operating profit up 27% • IFRS operating profit up 45% • IGD solvency capital up £0.6bn 18 All growth is stated on a constant currency basis © Aviva plc
Slide 19: Review of the business
Richard Harvey Group Chief Executive Review of the business 19 © Aviva plc
Slide 20: The balanced Aviva portfolio
The balanced Aviva portfolio HY 2006 HY 2006 sales EEV Operating Profits £21.3bn(1) £1.9bn(2) 41% International Life Aviva International 52% International General 12% Insurance 14% UK General Insurance Aviva UK 48% 33% UK Life (1) Half year 2006 total long-term savings new business sales and GI and
Slide 21: Aviva International: track record of growth
Aviva International: track record of growth 12,000 PVNBP Net Growth 10,000 2000 – 2005 Growth: 8,000 • PVNBP Growth of over 60% £m 6,000 4,000 • 250% increase in NBC 2,000 0 Ambition: NBC Net/Net/Net % • Average organic growth of at 250 2 1.8 least 10% p.a. over the next 200 1.6 5 years, while growi
Slide 22: Aviva International: a worldwide partner of choice for banks
Aviva International: a worldwide partner of choice for banks • International bancassurance International bancassurance gross new business contribution (NBC) sales up 17% to £3,457 million 350 for half year 2006 300 250 • International bancassurance 200 gross NBC up 21% to £171 £m 150 million for hal
Slide 23: UK Life: delivering growth
UK Life: delivering growth 4,000 UK Life total sales growth 3,500 Investment sales 3,000 £m Life and 2,500 pension sales 2,000 1,500 Q1'05 Q2'05 Q3'05 Q4'05 Q1'06 Q2'06 • Record half year, with total sales up 43% to £6,899 million • Growth ahead of the market with an 11.8% market share • Best ever q
Slide 24: UK Life: realising the potential
UK Life: realising the potential • Investment in the business – Strong and diverse distribution platform – Investment in product development and broad product range – Improving customer service • Competitive positioning for growth – Sales benefiting from A-Day – Successful collective investments str
Slide 25: General insurance: profit growth through superior execution
General insurance: profit growth through superior execution COR % Operating Profit £ bn • GI COR reduced from 109% to 110 2.0 92% between 2000 and HY 105 1.5 2006 100 1.0 • Confidence in our ability to meet or beat 98% COR for the 95 0.5 foreseeable future 90 0 • Underwriting discipline and 2000 200
Slide 26: Operational excellence across the group: successful offshoring
Operational excellence across the group: successful offshoring General insurance • All costs fully expensed Offshoring activity to December 2005 £m 25 • Enables Aviva to meet profit 20 Net Benefit 15 and expense targets 10 5 2006 2005 0 Offshoring across the Group: -5 2003 2004 Net Cost -10 • 5,500
Slide 27: AmerUs: our growth platform in the US
AmerUs: our growth platform in the US • AmerUs is a leader in a high growth and profitable segment of the world’s largest long-term savings market Platform • Excellent organic growth platform for growth • First-class management team • No. 1 in equity indexed life and No. 3 in equity indexed annuitie
Slide 28: Review of AmerUs Group
AmerUs Group Review of AmerUs Group Tom Godlasky Chairman, President and CEO
Slide 29: Legal disclosures
Legal disclosures Proxy Disclosure Additional Information and Where to Find It This communication may be deemed to be solicitation material in respect of the proposed acquisition of AmerUs Group Co. by Aviva plc. In connection with the proposed acquisition, AmerUs Group will file with or furnish to
Slide 30: Legal disclosures
Legal disclosures Cautionary Statement Regarding Forward-Looking Statements This document contains statements which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which include words such as “anticipate,” “believe,” “plan,” “estimate
Slide 31: AmerUs Group
AmerUs Group • Strategic focus on protection and accumulation products – Protection products include: • Universal life, term life, indexed life – Accumulation products include: • Fixed annuities, including indexed annuities • Distribution through IMOs, career agents and independent agents • Leader i
Slide 32: AmerUs Group: Overview of Business Mix
AmerUs Group Overview of Business Mix $ millions 06/30/06 Adj. Pre-tax 06/30/06 Reserve Allocation Operating Income (1) Life Indexed Life $788 Traditional Annuities Life $109.3 $3,647 Universal Life $1,634 Life Annuities Insurance $84.9 Fixed Deferred Indexed Fixed Annuity Annuities $8,275 $5,258 (1
Slide 33: AmerUs Group has strong core competencies
AmerUs Group AmerUs Group has strong core competencies: Leading Leading Accumulation Diversified and Balanced Protection Product Line Distribution Channels Product Line Disciplined Legal and AmerUs Solid Financial Compliance Group Management Proven Investment Strategic Focus and Strong Information M
Slide 34: Future Opportunities – The new Aviva USA
Future Opportunities – The “new” Aviva USA Benefits to Aviva • Leverage brand recognition • Platform for growing significant operations presence in US market • Expanded distribution • Expanded product lines • Additional geographic diversification • Expense synergies • Infusion of new talent • Enhanc
Slide 35: Summary
Summary • Growth in sales, profits and dividends • Balance of growth across all our businesses • With UK Life leading the way 35 © Aviva plc
Slide 36: Profitable growth across the portfolio
Profitable growth across the portfolio Operating profit (EEV basis) £1,699m +27% Operating profit (IFRS) £1,376m +45% Long term savings sales (PVNBP) £15,631m +25% New business contribution £459m +17% General insurance COR 92% (2005: 95%) Interim dividend per share 10.82p +10% Return on equity share
Slide 37: Appendix
Appendix 37 © Aviva plc
Slide 38: Capital strength: increasing solvency cover on EU groups directive basis
Capital strength: increasing solvency cover on EU groups directive basis FY Actual IGD Solvency £3.6bn 2005 Acquisition of Ark Life: £(0.2)bn Capital generation in the year net of RMM increase: £0.8bn H1 Estimated IGD Solvency £4.2bn 2006 0 1 2 3 4 £bn 1.9 times cover at 30 June 2006 38 © Aviva plc
Slide 39: Movement in net asset value per share
Movement in net asset value per share Reported pence As at 31 December 2005 622 Deduct: 2005 final dividend (17) 605 Operating profit for the period 43 Investment variances (16) Pension deficit 14 FX and other (2) Effect of issuing equity share capital (1) As at 30 June 2006 643 39 © Aviva plc
Slide 40: Capital generation: consistently strong operational capital generation
Capital generation: consistently strong operational capital generation H106 H105 £m £m New business strain (344) (210) Life inforce profits 786 646 Non life profits after interest costs 420 316 Normalised operating profits after tax 862 752 Interim dividend including preference shares and DCI (302)